TerraForm Power, Inc. (TERP) Surges on Investment Firm Upgrade

Shares of Beltsville, Maryland, based TerraForm Power, Inc. (TERP) rose on Tuesday, against the backdrop of a strong day in stocks across the board. TerraForm's stock was up 32.61%, rising $2.25 per share, to close at $9.15, on volume of 32,452,111 shares. Among other drivers, an analyst at a major investment firm upgraded the stock to "outperform", and set a price target of $10 per share.

The company buys assets with contracted cash flows, mainly solar and wind generation facilities that provide power to utility, commercial and residential customers. It primarily acquires "clean" power generation sources, such as solar, wind, natural gas, geothermal and hydro electricity, as well as hybrid energy solutions that enable the company to provide contracted power on a 24/7 basis. The company's stock trades on the NASDAQ.

On Monday evening, analyst Colin Rusch at Oppenheimer upgraded the stock to "outperform", with a price target of $10 per share. According to Rusch, TerraForm's stock is currently trading well below the intrinsic value of its asset portfolio, and the risk/reward profile is substantially waited to the upside.

Said Rusch, "With acquisition resources limited due to the Invenergy and VSLR deals (which we expect to close), we believe the run-off scenario provides an appropriate base case for investing in the stock...We believe the most recent leg down on shares after management changes is overdone and offers a compelling entry point on shares."

Perhaps more important however, TerraForm's Global business division canceled a proposed deal for renewable energy assets in Brazil. The deal would have been run through SunEdison, using a share swap with Renova Energia SA. The deal was valued at $3.45 billion, and it's cancellation is seen as a positive development for TerraForm by analysts and investors.

In yet another development, billionaire hedge fund manager, David Tepper, of Appaloosa Management LP sent a letter to the yieldco challenging TerraForm's participation in a 523 megawatt solar project the company is considering buying as part of SunEdison's acquisition of Vivant Solar. The Vivant project is larger and higher risk than the type of energy assets that the company typically buys. The value of the purchase is $922 million. Tepper's opinion strengthens the position that the acquisition of Vivant Solar will not be in the company's best interest.

TerraFront's stock also benefited on Tuesday at least in part due to the surprise disclosure that Appaloosa Management LP has a stake in the company, which includes both stock and senior notes.

Prior to Tuesday's market activity, TerraForms stock has been trading close to its 52-week lows (see article link below).

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SunEdison’s TerraForm Affiliates Shake Up ManagementSolar-power developer SunEdison Inc. and affiliated companies TerraForm Power Inc. and TerraForm Global Inc. made several management changes Monday as the companies continue to try to win back investor interest.